DEVELOPMENT

of Estonia, and the other post-Communist countries.
Although the low private contributions in the post-Communist
cases have path-dependent historical consequences,
it is still the lowest in Estonia (private voluntary and
mandatory contributions in Estonia are 0.02%; 0.04% in
Poland; 0.2% in Hungary; 0.9% in Slovakia; and 1.2%
of GDP in Slovenia). As an illustration, Figure 3.1.6 also
includes some liberal, or Anglo-American, welfare regimes,
in order to emphasize the differences from the continental
European model. In Japan, Canada, England, but especially
the U.S., the private social spending comprises a large part
of the total social expenditures (4%, 5%, 6% and 11% of
GDP, respectively). Despite of the differences in private contributions
Estonia and the Anglo-American countries are
similar in terms of total expenditures – which stay below
20% of the GDP. Acknowledging the fact that the Estonian
social policy simultaneously has low public and still
non-existent current private contributions leads us to the
conceptualising of welfare regimes typologies for realising
future social policy alternatives. Although, during the last
decade, social policy has been directed at increasing private
share in social spending, moving toward Anglo-American
social model has not been transparent and publicly recognized
policy agenda.
3.1.3
Types of welfare states and their future
The fundamental dilemma of a welfare state is the
relationship between the market and the state. Public
assistance and insurance are not the only objectives of
the welfare state – it is rather the trade-off between efficiency
and equity that is at the heart of many discussions
addressing the attempts to classify welfare states. There
is no single theoretical framework that gives justification
to state intervention and its dimensions. . Without being
exhaustive, one explanation for this is the concept of
Table 3.1.2
Classification of welfare states
Commodification
Stratification
Reference
countries
Liberal
Conservative
High Medium Low
Dual:
policies
targeted at
supporting
markets
USA,
Great Britain,
New Zealand,
Ireland
High:
opportunities
depend on
status
Germany,
Switzerland,
France,
Austria
Social
Democratic
Low:
policies
targeted
at equality
Sweden,
Finland,
Norway,
Denmark
Source: Table constructed by the authors, based on Esping-Andersen
1990
Figure 3.1.7
Esping-Andersen’s typology and the post-Communist
welfare states
Commodification index (USA=100)
110
100
90
80
70
60
50
40
30
20
10
0
LVA
POL
SLO
LTU
EST
GRC
USA
ESP
IRL
HUN
ITA
PRT
CZE
social traps, i.e. a situation in which a group of people act
to obtain short-term individual gains, which in the long
run leads to a loss for the individual as well as for the
group as a whole. The term “social traps” is the common
generalised term for market failures. These failures are
related to information traps (e.g. people underestimate
the probability of becoming unemployed), externalities
(e.g. the investments into the social and human capital of
children, as future taxpayers, also benefit the childless)
or the problem of “free riders”, where individuals lack the
incentives to contribute to the provision of public goods.
Since individual choices generally do not take social welfare
into account, private spending in the markets with
negative externalities is not efficient. However, these different
arguments are not sufficient for government intervention,
it has to be confirmed that the correction itself is
not going to produce even worse outcomes.
Therefore, the intervention of the state can be better
justified by the social contract. It can be a Rawlsian veil of
ignorance type of agreement – that relies on equality and
justice as fairness principles. According to Rawls (1971),
people would prefer the Difference Principle to regulate
inequalities, which only permits inequalities that work
to the advantage of the worst-off. Based on similar arguments,
Dworkin’s (2000) justification for redistribution
and egalitarianism is nested in the idea of an envy-free
society (distribution of resources), which was briefly discussed
above. In both cases, the interventions are justified,
not only by lending a helping hand to the markets
(protection of property rights, provision of law and order,
correction of market failures), but also by the redistribu-
GBR
FRA
DEU
AUT
BEL
FIN
NOR
DEN
SWE
30 40 50 60 70 80 90 100
Social protection index (SWE=100)
Comments: the first two principal components have been used to
compile indices from 16 different indicators that characterise welfare
states. Pre-financial crisis data from 2000-2008, 22 countries.
Source: Põder and Kerem 2011.
110
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